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GM executive says 3rd Saab model to bring brand to profitability

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Published: Mar 6, 2007 10:55 a.m. ET

Last Updated: Mar 6, 2007 11:18 a.m. ET

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GENEVA (MarketWatch) -- The head of General Motors Corp.'s
GM, +1.17%
European division said Tuesday that a third Saab model due to be launched will bring GM's premium Swedish brand to above break-even level around 2010, while the company's overall Russian sales may possibly be as high as 200,000 vehicles in 2007.

Speaking to a group of journalists at the Geneva Motor Show, Carl-Peter Forster hailed the recent turnaround at Saab, which saw annual sales growth of over 10% in 2006.

A year ago, GM was considering what to do with Saab, having been unable to make it profitable over several years. However, 2206 was a better year as the company brought down the cost base of the unit while at the same time improving sales through a revamped 9-5 range of models.

"The decision has been taken to grow the brand," Forster said, and the soon-to-be-launched Saab sports utility vehicle and a revamp of its 9-3 model range should make the brand profitable.

Saab's development of biofuel technology could also pay big dividends going forward, having already worked well in Sweden and grabbed some interest in the U.K., he said.

It "could very well be" that there will be heightened demand for biofuel-driven cars across Europe, he said, and the technology could also be a proposition in helping meet European Union lawmakers' proposals to force down emissions of carbon dioxide from cars.

Forster conceded that for GM Europe as a whole, Western Europe remains highly competitive, but that growth in Russia is set to continue. Having sold 130,000 vehicles in Russia in 2006, GM could possibly hit 200,000 sales in that country this year, he said.

Most of the growth in sales is coming from GM's South Korea-based Chevrolet brand, he said.

However, Forster said GM Europe had now put itself in a strong position in terms of brand positioning across Europe. Chevrolet is acting as the company's low-cost brand, GM has improved revenue per vehicle at Vauxhall and Opel by improving the quality and options available on those vehicles, making them "upper mid-market brands," while Saab and Cadillac are the company's two growth brands, albeit from low bases, he said.

He dismissed the need for Opel or Vauxhall to produce a new low-cost car, saying Chevrolet is filling that segment with models like the Matiz and Lanos.

He said GM Europe is targeting a rise in profitability in 2007 over 2006. "I think Rick would be disappointed if the budget was below the 2006 number," he said, referring to GM Chief Executive Rick Wagoner.

However, Forster dismissed media speculation that he could be set for a promotion to a global role at GM's worldwide headquarters. "It's rumors. It's flattering, but it's a little too much rumor. I'm happy where I am and I'm happy with the success we're achieving," he said.

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